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Choosing Confidence By: Charles Payne

"I think it is important, though, to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession," President Obama told Fox News (yes, that Fox News) in an interview with Major Garrett. Maybe the President was speaking to the concerns of Fox News viewers or maybe he was trying to establish a selling point down the road should a double-dip recession not materialize. (Most big-time liberal economists don't think it's going to happen, so to acknowledge it now thinking it's farfetched sets up another selling point down the road..."I averted a double-dip recession that was in the cards from the previous eight years under my predecessor.") But the thing that stuck with me was the mention of "people could lose confidence in the U.S. economy." Who the heck has confidence right now? Official readings on the topic shows confidence is dropping like a rock.

Unofficially, the only measure anyone needs to watch is unemployment, and even that number doesn't properly reflect the true state of our jobs picture. Plus, I don't think that the President gets the point. His comments made it seem as if, perhaps, the American people were choosing not to be confident. People aren't picking confidence the way they pick politicians or dessert after dinner, and that's why the road shows, constant campaigning and shout outs have lost their effectiveness. In fact, those things are beginning to have the opposite impact. Yet, there is going to be a so-called jobs summit followed by a jobs road trip. I don't know who's going to be at that summit but I hope it's not another room of sycophants and phonies. The summit should be on C-Span and other television networks from beginning to end, and there should be a way to allow viewers to send in questions and comments. That might mitigate the growing resentment to all of this non-stop campaigning stuff which feels more like a revival of Vaudeville than the leadership revival so desperately sought during the election.

With the holidays upon us, Americans are going to feel the joy and optimism that comes with the season, but they are also going to be reminded of their dreadful situations. Fathers will stare under Christmas trees and see shadows and firs where gifts used to be, and families will sit around chimneys in homes that have lost up to half their value. Most Americans are going to choose to be optimistic during the holidays because that's what they do and how this nation evolved into greatness. The message we want the White House to understand is that extending unemployment benefits, bragging about phantom saved jobs, and blaming the guy that messed this up but hasn't been around for almost a year doesn't engender optimism. If the goal is to avoid a double-dip recession, the President doesn't need another road trip or to round up the usual business suspects. Just let people keep more of the money they make, stop making success a four-letter word, and give small businesses the incentives needed to overcome worries about new taxes, new fees, and new fears.

One of the biggest problems with the White House is that so many

decisions are still tethered to global public opinion. When President Obama bent over in Japan it was like...oops, he did it again. In the same week the administration bent over, too, to appease the world with a trial of murderous terrorists that could become a platform for non-stop criticism of America. At some point it may register that to be popular around the world the President has to do things that make this nation weaker. In the meantime, we continue to take cues from Japan with respect to attacking our economic problems. Democrats are promising another jobs bill because the first one was so successful. The Fed is monetizing debt and buying up any of the stuff banks are willing to dump all in an effort to free up credit. Well, obviously, that's not working. What is nuts about all of this is that we have the template for why this doesn't work. We go back to Japan where that ill-conceived bow occurred.

Japan's Lost Decade(s)

In the aftermath of World War II, Japan set itself up as the low cost provider for many items and its economy became an export juggernaut. By the 1970s, it was the number two economy in the world, and it shifted its focus from exporting to its domestic economy. As it was able to compete on quality rather than volume the country decided to pump up its own living standards. The rapid pace of economic growth made Japan the envy of the world, but also created monster asset bubbles in their real estate and stock markets. In panic, and out of a history of pride and ego, the country decided to prop up failed businesses, insolvent banks, pump money into failed banks, and support policies aimed at keeping lifetime employment in place. Some economists say that these policies created a lost decade of growth and true opportunities, but a look at the Nikkei 225 shows these policies created two decades of lost opportunities. I think that the economic malaise has also distracted Japan's business execution and innovation.

How Long Can Stocks Rally Under Such Bad News?

Much has been made of how this stock market could rally when things
are so awful. I have to say that it's not unusual as it has happened in the past even during the period of the last double-dip recession. The stock market rallied through most of 1980 and into may 1981, when the unemployment rate reached 7.5%. However, the unemployment rate was still climbing into August 1982 when the market reached a bottom and made a sharp reversal higher even during nine straight months of 10.0% plus unemployment. Of course, back then, President Reagan was lowering taxes, building up a strong military, and projecting America as a special place in the world not one among equals.

The dollar is getting whacked again as the world sees the healthcare bill as a threat to the U.S. economy. Most investors are smart enough to understand the price tag on this healthcare reform plan making the rounds will cost much more than the official price tag. It's clear that there will be more deficit spending as the adminstration is loathe to go just with tax breaks and will never cut big businesses a break. The stock market is willing to go along for the ride as gold this morning surges to another all-time high.